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Tax lawyers Paul DioGuardi, left, and his son, Philippe, run DioGuardi Tax Law, known for its colourful radio spots. The pair deny allegations made by the Law Society of Upper Canada, and say the professional body is trying to silence their concerns about protecting clients' money from tax collectors. (Kenyon Wallace / Toronto Star)

Tax lawyers Philippe, left, and Paul DioGuardi say they make use of special "tax debtor accounts," in which a client pays them a general retainer that immediately becomes the lawyers’ property. That way the money cannot be seized by the Canada Revenue Agency. The Law Society of Upper Canada says that this practice goes against its bylaws and rules of professional conduct. (Tim Leyes / DioGuardi Tax Law)

For more than a decade, Philippe DioGuardi and his father, Paul, have cultivated an attack-dog reputation as the tax lawyers to call for people in trouble with the Canada Revenue Agency.

With the help of a relentless advertising campaign — most notably a series of colourful radio spots, and TV ads and billboards portraying CRA agents as men in dark suits and sunglasses — the father-and-son team say they have helped more than 8,500 clients with their tax problems.

But now, Philippe DioGuardi is facing a problem of his own.

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The Law Society of Upper Canada, which regulates the legal profession in Ontario, is alleging DioGuardi took money from six clients before doing “any or very little” work, failed to provide legal services “to the standard of a competent lawyer” and, in one case, did not file income tax returns for a client “in a timely manner.” The law society alleges DioGuardi “failed to act with integrity” by having the six clients sign retainer agreements that benefited his firm, DioGuardi Tax Law, “to the potential detriment of the clients.”

DioGuardi, 52, denies all the allegations and says he will “vigorously defend” himself and his firm.

The proceeding against DioGuardi could have significant consequences. The law society is responsible for
disciplining members
who violate the rules of professional conduct. If the law society determines DioGuardi broke those rules, he could face sanctions that include a reprimand, fine, suspension or disbarment.

At the heart of the case is an uncomfortable question: is Philippe DioGuardi legitimately protecting his clients’ money from the CRA, as he claims, or has he taken money that doesn’t belong to him?

Law society bylaws stipulate that lawyers are normally required to deposit retainers they receive from clients into a trust account. Lawyers cannot take their fee out of the account until they have performed work and billed the client.

In an interview with the Star at their Mississauga office, Philippe and Paul DioGuardi said that because money in a trust account belongs to the client, it could be subject to seizure by the CRA if the client owes back taxes. They say that if the CRA comes calling, the lawyer holding money in trust for a client becomes liable for the tax owing.

To get around this, the DioGuardis say they make use of a special “tax debtor account” in which a client pays them a general retainer that immediately becomes the lawyers’ property.

“If (the CRA) tries to seize it, we say, ‘Sorry, it’s our money,’” said Paul DioGuardi, 75, who worked for many years at the CRA’s head office and then at the Department of Justice. He stressed that his firm always does the work it is hired to do and that “nobody’s ever lost a penny with us.”

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The law society’s application against Philippe DioGuardi says that not using a trust account goes against a bylaw of the organization and rules of professional conduct.

The DioGuardis framed the allegations as an attempt to silence them in their efforts to raise concerns about a law society rule they say puts client money at risk of seizure by the CRA. The father and son say they have been asking for a policy review on the practice and direction from the regulator since 2009. They say the law society is using the disciplinary motion to “deflect” from its “obligation to review policy and protect the public interest.”

“What I’m being told here by the law society is ‘Harm your client. Throw him under the CRA tax collector bus.’ I can’t do that as a lawyer. So this is why we’re standing up,” said Paul DioGuardi.

Law society spokesman Roy Thomas said it would be inappropriate for the organization to comment on issues raised by a participant in a disciplinary proceeding.

A CRA spokesman confirmed that the Income Tax Act gives the government the power to issue a “requirement to pay” to a lawyer who is holding money on behalf of a client and to apply these funds to the client’s outstanding tax debt.

Al Rosen, founder of Rosen & Associates, a Toronto-based investigative accounting firm, said the idea behind the CRA’s powers is to ensure those who owe taxes can’t avoid paying them by sheltering money in a lawyer’s trust account.

“I think the law society is on the right track with this one,” Rosen said, noting that retainers are not earned until work is completed.

The law society would not provide a dollar figure for the retainer fees at issue in the application against DioGuardi and identified the six clients in the case only by their initials.

The Star tracked down one of the complainants, Silverio Garda, who said he went to the law society last year after he paid $2,000 to DioGuardi Tax Law for work that was never done. According to Garda, the firm said it could help him resolve a problem with an old tax return in late 2012.

But several months later, the CRA closed his bank account, said Garda, 61. The agency told him it had never heard from the tax lawyers.

After Garda complained to the law society about Philippe DioGuardi, the law firm sued him for $160,000 in damages, alleging Garda hired an unnamed lawyer to “coach him on how to use the Law Society complaint process against (Philippe) DioGuardi for the purpose of securing free legal services,” according to the statement of claim filed in June 2013.

DioGuardi claimed Garda told him he would pursue the complaint to the law society unless the firm refunded his retainer fee and did the work at no charge. The lawsuit alleged that Garda hired an unnamed competitor of the law firm to help him file the complaint “to injure the reputation, integrity and goodwill established by DioGuardi Tax Law in its area of practice.”

Garda insists that his complaint was justified. In fact, Garda said it was DioGuardi who offered to refund his retainer and perform legal services free if he withdrew the complaint. Garda said he has already spent $5,000 in legal fees to defend himself against the lawsuit.

“It’s not fair. I’m being punished. I’m a poor guy. I’m suffering because of this guy,” Garda told the Star.

The case is ongoing, DioGuardi said.

DioGuardi told the Star that in his line of business, “you’re going to find some disgruntled clients.”

“Of course people are never happy about taxes,” he said, adding, “Our track record is pretty darn good.”

It is a reputation he and his father have fought repeatedly to protect.

In 2010 and 2011, the DioGuardis sued Google Inc. and the U.S.-based Internet lawyer rating site Ratingz Inc., respectively, in an effort to force the companies to reveal the identities, IP addresses and other information about those who posted negative reviews online about the law firm.

The Google case revolved around an anonymous Google Maps posting by “Tony,” who said he paid DioGuardi Tax Law $7,500 to deal with a CRA demand for back taxes. “Tony” claimed the firm set him up with an accountant to prepare missing tax returns under the voluntary disclosure program, but the CRA dismissed the request “due to the fact that they had already demand that I file.”

He says he demanded his money back, but “DioGuardi never again replied to any of my email or telephone requests,” according to the Internet posting, which was attached as an exhibit in the lawsuit against Google.

The Ratingz suit concerned negative postings about the firm, including ones the DioGuardis say they believe were made by a former employee now working for a competing tax law firm.

In both cases, the DioGuardis obtained orders for disclosure from the Ontario Superior Court, but neither Google nor Ratingz Inc. appeared in court, nor did they produce the information the law firm sought. Reviews of DioGuardi remain on the Ratingz website.

Philippe DioGuardi said he could have gone to California in an attempt to enforce the court orders, but he “decided to let it go because from my point of view, it’s just like graffiti on a wall. It’s meaningless until you put a name.”

Instead, DioGuardi set up his own complaint
website
, where people have to provide their email addresses so that he has a chance to respond.

The law society’s case against DioGuardi continues with a public conference on May 26. It has not yet been determined whether the case will proceed to a formal disciplinary hearing.

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